October 2022
Pei-Ching Ji and Sean Tang
Article 210, Paragraphs 1 and 2 of the Company Act of Taiwan provide: “Subject to the provisions otherwise provided for by the competent authority in charge of securities affairs, the board of directors shall keep at the head office of the company copies of the Articles of Incorporation, the minutes of every meeting of the shareholders and the financial statements, and shall keep at the head office of the company or the business office of its shareholder service agent the roster of shareholders and the counterfoil of corporate bonds issued by the company (Paragraph1). Any shareholder and any creditor of the company may request at any time, by submitting evidentiary document(s) to show his/her interests involved and indicating the scope of interested matters, an access to inspect, transcribe and make copies of the Articles of Incorporation and accounting books and records referred to in the preceding paragraph; and if the Articles of Incorporation and accounting books and records are kept in a shareholder service agent, the company shall cause such an agent to provide the access.” In particular, Paragraph 2 pertains to the “right of a shareholder to inspect the Articles of Incorporation and accounting books and records.” Recently, the 111-Shang-112 Civil Decision of the Kaohsiung Branch of the Taiwan High Court fully discussed the issues related to this topic and is worthy of reference. The facts of this matter and the opinion reflected in the Taiwan High Court decision are separately described below along with a brief analysis.
I. Case facts
The Appellee, as a shareholder of the Appellant, asserted that the Appellant’s current legal representative had repeatedly prevented the Appellee from interfering with the Company’s affairs, and therefore had requested, in accordance with Article 210 of the Company Act, an access to the Appellant’s Articles of Incorporation, minutes of previous shareholders’ meetings, roster of shareholders, business reports, balance sheets, consolidated income statements, cash flow statements, statements of changes in equity, and corporate bonds counterfoils after 2014.
II. Opinion in the 111-Shang-112 Civil Decision of the Kaohsiung Branch of the Taiwan High Court
1. Since the Appellee is indeed a shareholder of the Appellant, the Appellee indubitably has an interest in the Appellant. As the Appellant has denied the Appellee’s right of access to inspect such materials, the Appellant has clearly refused the Appellee’s request for an access to inspect the materials. Therefore, the Appellee’s request for an access to the relevant accounting books and records as lodged pursuant to applicable requirements is certainly justified by law.
2. The materials that may be inspected upon request under Article 210, Paragraph 2 of the Company Act refer to the Articles of Incorporation, minutes of previous shareholders’ meetings, the roster of shareholders, financial statements (including business reports, balance sheets, consolidated statements of income, cash flow statements, and statements of changes in equity), and the counterfoils of the Company’s corporate bonds. However, since the Appellant has not issued any corporate bonds, there is no way to maintain corporate bond counterfoils. Therefore, this part of the Appellee’s request is still unfounded.
3. The Appellee may appoint an attorney or a certified public account to inspect the materials. Moreover, taking photographs, in addition to making photocopies, transcription, or duplication, is also not inconsistent with the gist of Article 210 of the Company Act.
III. Brief analysis in lieu of a conclusion
The requirements for a shareholder to exercise the right of inspection in accordance with Article 210, Paragraph 2 of the Company Act have always been the focus of academic and practical debates. In the past, the competent authority held that the term “supporting documents for interest relationship” refers to the documents that show one’s identity and interest in the company,[1] and that there must be a “legal interest” as in the case of a debt relationship[2]; the term “designated area” refers to the area designated by the shareholders and the company’s creditors as the area in which they have an interest.[3] Obviously the competent authority adopted a more stringent interpretation. In this regard, some scholars suggest that the U.S. law may be considered for reference, where the exercise of a shareholder’s right of inspection should be reverted back to the determination of the “legitimate purpose” of the shareholder,[4] and the purpose must be reasonably related to the shareholder’s interests. The Company may deny a shareholder’s right to inspect the roster of shareholders if the purpose of inspection is to sell it for profit, which is not a legitimate purpose. In addition, some scholars believe that if the Company considers that the exercise of the shareholder’s right to inspect is limited to “interest,” the Company may deny access for legitimate reasons.[5] The 109-Tai-Shang-2058 Civil Decision of the Supreme Court affirmed that a company’s shareholder may request to inspect or transcribe its accounting books and records in the capacity of a shareholder and adopted a more relaxed interpretation. The Taiwan High Court decision mentioned above carried out the gist of the 109-Tai-Shang-2058 Civil Decision of the Supreme Court, holding that since a shareholder has the right to know the company’s operating status, share the company’s operating results, a shareholder can certainly exercise the right to inspect the company’s accounting books and records without separately presenting any supporting document for the interest relationship. This decision carried out the relaxed interpretation of the Supreme Court. This opinion is favorable to the protection of the right of minority shareholders and the development of corporate governance, and it is worth noting if it will become a consistent practical opinion.[6] However, it should be considered at the same time that if the exercise of the shareholders’ right of inspection is affirmed excessively, it may be conducive to the side effect of shareholders invading the company’s internal communication and control system. Therefore, it is still necessary to strike a balance between the two as much as possible.
In addition, this Taiwan High Court decision took into account a circular issued by the competent authority[7] and the legislative history, implemented the gist of the Supreme Court decisions,[8] specifically stated the scope of materials that shareholders can inspect, and explicitly recognized that shareholders can appoint a lawyer or certified public accountant to perform the inspection and can inspect by means of photographs. As compared with the Supreme Court decisions in the past, although some affirmed the materials that shareholders may inspect and the right of shareholders to retain an attorney to perform the inspection, but it was very rare to specifically indicate in the decision reasons the scope of materials that a shareholder may request to inspect and the inspection method. In this case, the Taiwan High Court decision should be recognized for containing a more specific interpretation of the above-mentioned matter, and the conclusions are also favorable to the protection of a shareholder’s right of inspection. However, the above decision is not yet a decision of the court of final appeal, and it remains to be seen if the case will be appealed and if the final decision adopts the same opinion.
[1] See the Jing-Shang-09202119150 Circular of June 16, 2003 from the Ministry of Economic Affairs.
[2] See the Jing-Shang-09302406700 Circular of December 29, 2004 from the Ministry of Economic Affairs; and the Jing-Shang-09702045480 Circular of April 23, 2008 from the Ministry of Economic Affairs.
[3] Same as Note 1.
[4] See Hsin-ti Chang, The Research of the Inspection Right of the Shareholders of Companies Limited by Shares – Focused on the U.S. Law, the National University of Kaohsiung Law Journal, Volume 9, Issue 2, March 2014, pp. 104-105; and Ta-wei Kuo, The Exercise of the Inspection Right by the Shareholders of Companies Limited by Shares, Taiwan Jurist, Issue 187, May 2018, pp. 19-20.
[5] See Ching-ping Shao, On Company Information Right: A Look into the Controversies Arising out of the Amendment Concerning Director’s Right to Information, Soochow Law Review, Volume 30, Issue 4, January 16, 2019, p. 23
[6] Please refer to the 110-Shang-136 Civil Decision of the Taiwan High Court for a similar decision.
[7] See the Jing-Shang-09202076190 of April 23, 2003 from the Ministry of Economic Affairs.
[8] See the 109-Tai-Shang-2058 Civil Decision of the Supreme Court; and the 110-Tai-Shang-3245 Civil Decision of the Supreme Court.
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